If you want to improve the culture and climate of your business, read "Delivering Happiness".

This interview contains many logistics concepts and my pet economic concept. My pet economic concept is product differentiation will be the key to competitive success. In this interview, Tony says that Zappos is "High Touch" and Amazon is "High Tech" meaning that his product was different because of the human element. The human element is design, art, customer service which are all non price tools of competition.

Saturday, October 23, 2010

The EIA has an excellent interactive site showing how to compute real prices for crude oil, gas, and electricity. The Energy Information Association site is here.

The base year is the average of 1983-84. What I found interesting and need to reflect on is how the real and nominal have converged over time. Does this mean that profits have been competed away? Does this mean that the price of other goods have become relatively cheaper?

Monday, October 18, 2010

I heard a TED Talk that it took 28 barrels of oil to make a cheeseburger. This Chartporn graphic made me think of all of logistics needed to bring the ingredients together. There's oil needed every step of the way from gathering raw goods to consumption.

Saturday, October 16, 2010

This ad was taken from the London Business School. I am using it to show how technology has changed how we go to meetings. Many of the participants needed to make the meeting a success, can remote in with some sort of device or virtual link. They are ghosts in the meeting. How has your business changed? Do you use wiki's or Skype? With the new technology, we are able to contribute and collaborate from remote locations 24 hours a day. To me technology is explaining how come prices just don't skyrocket in the long run. For example, with semiconductor and microprocessor technology so cheap and powerful, computers are in everything. When the price of something decreases, more can be done. I think technology is putting downward pressure on prices. Will wages soon follow?

Wednesday, October 13, 2010

Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20."

Drinks for the ten now cost just $80
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get his 'fair share?'
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay! And so...

The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now paid $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!"
"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!"
"That's true!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!" The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

David R. Kamerschen, Ph.D.
Professor of Economics, University of Georgia

Tuesday, October 12, 2010

I just recorded small bytes of Mr. Scott's presentation. He repeatedly stated, to make small acts of kindness. In economics, small increments are called marginal thinking. Think small and make big changes.

Monday, October 11, 2010

In economics, resources are scare. Because resources are scare, people have to make choices. As competition for resources increases, people will have to be more creative in the use of resources to fulfill unlimited wants. This line of reasoning is one reason why I believe that creativity will rule this generation.

It's a strange irony that when you are given less time and less resources to complete a project that the creative juices flow. This quote is from Dieter Ernst of the East-West Centre, a think tank in Honolulu, "Profit margins are razor thin and do not allow adequate investment in R and D and branding. The Taiwanese industry is particularly weak where the most valuable intellectual property is created these days: in software, services and systems." (Economist, May 29, 2010, page 67.) Services and software require creativity. Manufacturing a microchip doesn't add much value. The value comes in the design.

I think creativity drives growth. On FB there are hundreds of opportunities to differentiate yourself and stimulate the right side of your brain. For example, there are interactive games that require strategy to play. There are photos to post and comment on like visiting an art gallery. Because your friends will read your comments, you want to be colorful when you write.

Look at any growth sector and see if growth was the result of creativity. For example, Amazon.com sells books. But Amazon also sells space and the opportunity to create your own book for publication. Behind the growth of a sector you will find that creativity was the driving force.

Sunday, October 03, 2010

My mission statement is “In challenge there’s opportunity” which is characterized by the Chinese “Wei-ji”. As technological revolutions over leap each other daily, educators are finding their roles are changing. I believe educators are going to be asked to add value to a student’s experience and not content.
A value-added education is one in which content is supplemented by high concept teaching, media fluency, effective communication, creativity, entrepreneurialism, globalization, synthesis, innovation, and Information Communication Technology. Increasingly, students are going to be asked to make connections among seemingly unrelated concepts to differentiate their productive capacities.

As the barriers to trade are broken down and collaboration becomes essential for survival, logistics and logistic processes will become an essential capstone class in the business curriculum. I believe that logistics synthesizes all business subjects into one class and provides the most opportunity for a value-added education.

An iPod is made with 451 parts. According to Hal Varian, approximately $163 of the value is added in the United States by Apple and domestic component makers. $80 of the the value is added by US consumers in the form of consumer demand. The iPod is not made in the US but the idea was created here. In the end, nothing else matters.

Friday, October 01, 2010

Information Communication Technology has changed my job in dramatic ways. I record my lectures with a Livescribe pen and upload them to my blog and Facebook. YouTube is now an online resource as well as Wikipedia, Google, Digg, Delicious, and hundreds of other sharing sites. The St. Louis fed offers online learning modules that can replace the teacher with a more knowledgeable instruction complete with interactives. These pedagogical changes in my profession has led many educational reformers like Bill Daggett to say something like "the teacher is now a facilitator and not a respository for information."

What the reformer means is that the teacher used to disseminate information that kids sucked up like a vacuum. That's one reason why teachers get paid on a scale that rewards educational attainment.

Microeconomics is about scarcity. A point made in The Price of Everything, by Russell Roberts, was that the material difference in the quality of life between the rich and poor is not as pronounced as 100 years ago. For example, today income earners in the lower 20% have a cell phone. An because the economy is producing a higher quality good, the clothes are of high quality. When you look at material goods, the standard of living really isn't that pronounced. Now, information is equally accessible to both classes. This leads reformers to say the teacher is now a facilitator. The implication is that a teacher will be replace by a computer and a security guard. But I think the teacher is a facilitator is wrong.

If information is free and equally accessible, then the teacher's job becomes to find a way for students to add value to their learning. Ways that a teacher can add value is by teaching students how to be creative, problem-solve, effectively communicate, and differentiate.

My profession has changed from providing content to adding value to the content.